Marlene Grecco

What Impact Might COVID-19 Have on Home Values?

April 27, 2020

A
big challenge facing the housing industry is determining what impact
the current pandemic may have on home values. Some buyers are hoping for
major price reductions because the health crisis is straining the
economy.

The price of any item, however, is determined by supply and demand, which is how many items are available in relation to how many consumers want to buy that item.

In residential real estate, the measurement used to decipher that ratio is called months supply of inventory. A normal market would have 6-7 months of inventory. Anything over seven months would be considered a buyers’ market, with downward pressure on prices. Anything under six months would indicate a sellers’ market, which would put upward pressure on prices.

Going
into March of this year, the supply stood at three months – a strong
seller’s market. While buyer demand has decreased rather dramatically
during the pandemic, the number of homes on the market has also
decreased. The recently released Existing Home Sales Report from the National Association of Realtors (NAR) revealed we currently have 3.4 months of inventory. This means homes should maintain their value during the pandemic.

This information is consistent with the research completed by John Burns Real Estate Consulting, which recently reported:

“Historical
analysis showed us that pandemics are usually V-shaped (sharp
recessions that recover quickly enough to provide little damage to home
prices).”

What are the experts saying?

“Supported
by our analysis of home price dynamics through cycles and other periods
of economic and housing disruption, we expect home price appreciation
to decelerate from current levels in 2020, though easily remain in
positive territory year over year given the beneficial factors of
record-low inventories & a historically-low interest rate
environment.”

“The
fiscal stimulus provided by the CARES Act will mute the impact that the
economic shock has on house prices. Additionally, forbearance and
foreclosure mitigation programs will limit the fire sale contagion
effect on house prices. We forecast house prices to fall 0.5 percentage
points over the next four quarters. Two forces prevent a collapse in
house prices. First, as we indicated in our earlier research report,
U.S. housing markets face a large supply deficit. Second, population
growth and pent up household formations provide a tailwind to housing
demand. Price growth accelerates back towards a long-run trend of
between 2 and 3% per year.”

Featured Listings

Lovely home in great neighborhood. Great floorplan, step-down living room with gas fireplace and vaulted wood beam ceilings. Well-kept backyard with lush greenery. Best price in the area. Needs TLC. Great potential, great opportunity. Must see!

Newly updated and remodeled home. Great for family living and entertainment. Open floorplan. Modern kitchen with quartz countertops and stainless steel appliances. Sunroom. Recessed lightning. Well-kept backyard. More! Must see!